Follow the Rules: Retiring Past Age-65 and How it Impacts Medicare

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Should you be on track to retire after age 65, you may choose to forgo signing up for Medicare and remain on your employer's health plan. This choice, however, is risky; you could wind up without insurance for several months and may even have to pay an annual penalty! That is why it is important to follow the strict enrollment rules for Medicare.

Medicare Part B eligibility begins when you turn 65. This portion of Medicare covers outpatient services, such as doctor visits. You may find that continuing with your employer-provided coverage is both cheaper and easier, and opt to take corporate retiree medical benefits or buy into the group health plan under COBRA. Companies with at least 20 employees are required to allow former workers to buy into the group health plan for up to 18 months under COBRA law.

Understand that this route could prove risky. After turning 65, you are able to opt out of Medicare consequence-free IF you are still working and your employer's group health plan still covers you. However, upon leaving that job, you have just eight months to enroll in Part B beginning the month after you retire. Those workers still covered by their employer's health plan are still required to enroll in Part B during this "special enrollment period."

Missing this deadline while letting your employer coverage expire could leave you uninsured for an extended period of time. It is not until the next "general enrollment period" that you can enroll in Medicare Part B. That window is open from January 1 to March 31 each year with your coverage beginning until July. On top of that wait, you may be subject to considerable penalties.

Often it is not until the group health plan rejects a claim that retirees realize they have made an error. That is because once you turn 65 a health plan or COBRA only pays for medical expenses which Part B doesn't cover. Employers consider Medicare a primary insurer even if you opt out of enrolling in Medicare Part B. Further, those health plans that have failed to pick up on the fact that you've turned 65 and are eligible for Part B may try to recover benefits they've paid out since that time.

If you want to speak with a trusted financial planner, feel free to contact us at 516-496-7800 with your retirement questions.

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